Transaction process optimization driven by high investment activity

Poland’s warehouse real estate market enters the next stage of its growth cycle. Tomasz Kostrzewa, senior investment director Capital Markets at 7R, explains on how to best manage due diligence processes through the times of increased demands for investment in warehousing.

 

The latest data clearly show that the warehouse sector has not only proved to be resilient to significant market turmoil deriving from, among others, the Covid-19 pandemic, but has made gains on the upheaval. As a result, the market continues to break new records, as the growing market demand is matched with correspondingly high activity and growth of developers.

 

Investors do not want to wait

Over the last 10 years, the warehousing market in Poland has matured. The more attractive it became, the lower product availability it offered, while volumes of capital willing to enter this real estate sector grew up at the same time. Investors did not want to wait on the entire property portfolios to be completed, so they increasingly started to look for single properties offering the best-of-class quality,

explains Tomasz Kostrzewa

Senior Investment Director Capital Markets

Consequently, the number of the so-called single-asset transactions increased considerably. To keep up with the growing investor appetite, it was crucial to enhance the way transaction processes were carried out, including at level of pre-transaction due diligence examinations. Their number is now unmatched, and they are often performed on a much larger scale.

 

When an investor looks at several single projects at the same time, as part of a portfolio transaction, due diligence process must be conducted for that entire group of properties simultaneously. What is more, it can be expected that each building of interest could be sold separately at any time, and so such transaction process should not impact ongoing due diligence studies for remaining properties.

 

Interdisciplinary approach

 

As Tomasz Kostrzewa points out, in order to make sure that the examination process runs smoothly and efficiently, due diligence should get underway at the start of the development. This approach, dubbed ‘vendor due diligence’, results in due diligence study being continued throughout all the stages of project developing, up until the sale transaction gets finalized.

 

A team of staff properly selected to run the process is yet another factor enabling efficient and reliable property due diligence. Specialists of many fields, from legal, to tax, to technical, must be involved on the seller's side when coordinating due diligence.

You should also keep in mind that while being processed on the buyer’s side, the project will undergo examination by professionals from different lines of industries. Therefore, it is important that an equally diversified team is gathered on the seller’s side, 7R combines the expertise of multiple specialists: from negotiators, to financiers, to engineers. Establishing such teams is a natural part of due diligence processes for us, 

adds Tomasz Kostrzewa. 

This interdisciplinary approach on both sides allows, to an even greater extent, for delivering due diligence in the property analysis process preceding the acquisition. - The buyer wants to know what he or she is getting. The buying side might have a certain set of presumptions about the project and due diligence enables validating these. That is why at 7R we make every effort for the process to be carried out in an agile and reliable manner - explains Tomasz Kostrzewa.

Despite the common belief, due diligence should not start only after the project is sold. If you already notice something uncanny at the stage of land purchasing, such matter will not simply go away, and will resurface at the time of sale, so these concerns should be identified ahead of time, at the very beginning,

clarifies Tomasz Kostrzewa.

Author: Tomasz Kostrzewa

Senior Investment Director at 7R's Capital Markets Team 

Tomasz Kostrzewa works with investors to raise equity, negotiate development contracts, and coordinate the investment process. He participates in sales transactions of completed projects for investment funds and provides Asset Management services.

Contact: [email protected] 

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